- 18 Jan, 2016

Whats the Average Australian Home Loan Size?

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The size of the average Australian home loan has grown considerably over the last 20 years. As home prices skyrocket and housing affordability decreases more home loan holders are making minimum home loan repayments, which has financial experts questioning if too many Australians are over-committed financially and under mortgage stress.

Let’s wind the clock back and look at how much the average Australian home loan has grown over the years.

The Historical Growth of the Average Australian Home Loan

According to the Australian Bureau of Statistics (ABS), back in 1975, the average sized home loan nationwide was just $17,400. By 1985, the average sized home loan had increased to $41,800. Ten years later in 1995, the average sized home loan jumped to $95,600, and by 2005 to $277,500. By 2015, the average home loan size had reached $382,400.

On a state-by-state basis, New South Wales (N.S.W) and Victoria (VIC) have typically always had the highest average home loan size, and Tasmania (TAS) the lowest. The average home loan sizes for these states between 1975 and 2015, according to the Australian Bureau of Statistics (ABS), are as follows:

Average Home Loan Cost

N.S.W VIC TAS
1975 $18,600 $16,200 $15,900
1985 $46,600 $40,900 $30,100
1995 $114,500 $85,700 $70,200
2005 $262,300 $209,000 $153,300
2015 $454,200 $387,600 $236,400

Source: ABS

How Much Does the Average Australian Need to Earn to Cover the Average Mortgage Cost?

Based on data, financial experts believe that some buyers are better-off than others when it comes to buying property in a specific capital city. For instance, the median price of homes in Sydney are far greater than homes in Adelaide, and this can mean the difference between a home loan being manageable or a burden.

For the average Australian buying a home in Sydney, which has a median home price of $840,000, according to CoreLogic RP Data, they need to be earning approximately $154,482 before tax a year. This is providing these house hunters are seeking to buy outside of the CBD. If theyre seeking to buy in an inner city location, then the median price jumps to $1 million. Therefore, these buyers will need a higher average income to cover their costs. For those who are seeking to buy a unit in Sydney, the average earnings per year will still need to be $115,000.

Average Earnings Needed in Australian Capitals to Cover Average Mortgage Costs

Capital City Home Median Earnings per Annum Unit Median Earnings per Annum
Sydney $840,000 $154,482 $630,000 $115,862
Canberra $580,000 $106,666 $417,000 $76,689
Darwin $575,250 $105,792 $460,000 $84,597
Melbourne $569,000 $104,643 $470,000 $86,436
Perth $550,000 $101,149 $435,000 $80,000
Brisbane $487,500 $89,655 $397,000 $73,011
Adelaide $420,00 $77,241 $340,000 $62,528
Hobart $352,500 $64,827 $275,000 $50,574

Source: CoreLogic RP Data

The figures in the table above, are based on an interest rate of 5.61%, which currently represents the average standard variable home loan rate for many lenders, and includes a 20% deposit.

What's the Average Australian Home Loan Size?

What is Mortgage Stress?

For those of you who are wondering, mortgage stress typically occurs when your home loan repayment is more than 30% of your income. According to recent research on housing affordability, the proportion of income that the majority of Australians need to meet their home loan commitments has increased by 1.4% to 31.7% on average.

Mortgage stress is said to blame for the rise in minimum home loan repayments. According to research, more Australian mortgage holders are now only making a minimum repayment on their home loan. This is despite home loan interest rates being at historic lows.

One of Australia’s largest banks has stated that it has recorded a significant rise in home loan holders making minimum home loan repayments. The bank said that rates had shifted from 32% of their customers electing to pay the minimum off their home loan, in February of 2015, to 68% in December 2015.

This has prompted financial advisors to warn Australians about over-committing themselves financially, otherwise there could be repercussions when home loan interest rates rise. At present, many financial experts feel that home loan holders have become a little too complacent about home loan interest and that they are optimistic that rates won’t rise. This, say experts, is a dangerous mindset that could be costly long-term.

Reducing Your Mortgage Commitment

The best way to reduce your mortgage commitment and any possibility of mortgage stress are to pay as much as possible off your home loan while interest rates are low. Its also important for you not to commit yourself to too many other large financial purchases, such as buying a car, if you dont really need to.

Smart budgeting and spending money only when you need to will allow you to pay more off your home loan faster, and to reduce your overall debt. Less debt means less stress, and youll be able to meet your financial obligations without any difficulty.

Are you interested in knowing more about paying your home off faster? Then contact eChoice. We can help you find a cost effective home loan for YOU.

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